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From Macro to Micro: Translating Mega Trends into Strategy

A three-page excerpt from our 15-page Best Practice Guidebook:

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guidebook summaryFirm: Knorr-Bremse AGIndustry: Rail and Commercial Vehicles (braking systems)Headquarters: Munich, GermanyGeographic Footprint: GlobalOwnership: PrivateRevenue (2012): $5.6 billion USD

From Macro to Micro: Translating Mega Trends into Strategy

Problem: Knorr-Bremse has to create a process to harness the emergence of major global trends and the inherent opportunities (and risks) they present for the company and each of its divisions.*

Solution: Knorr-Bremse develops a Macro-to-Micro process for identifying and prioritizing Mega Trends to drive growth. Key process steps include:• Establishing a dedicated Mega Trends team• Filtering Mega Trends to determine the most meaningful for the

business• Incorporating Mega Trends into the annual strategic planning process

Business Results:• From 2008–10, Asia’s share of Knorr-Bremse’s sales more than

doubled from 10% to 27% • From2006–10,revenueforRailVehicleSystemsinAsiaPacificgrew

almost 100% each year

Resources Required: • 15–20-member Mega Trends planning team, composed of senior

executives from each division, all regions, R&D, Sales, and Marketing• VP, Corporate Development and 50% of an analyst’s time for

one year•Access to syndicated and secondary research on global trends

Applicability of Best Practice to Executive Functions: Function Applicability

CEO/Leadership

Corporate Development

Corporate Strategy

R&D/Innovation

Best Practice Guidebook

* Rail Vehicle Systems makes braking systems for mass transit and long-distance rail networks. Commercial Vehicle Systems makes braking systems for trucks and buses.

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Knorr-Bremse develops a process for integrating Mega Trends with strategic planning and pursuing market opportunities

Knorr-Bremse’s Macro-to-Micro Mega Trend Integration Process

ActionThe Vice President of Corporate Development establishes criteria for identifying global trends and conducts research to develop initial Mega Trend clusters.

ActionThe VP, Corporate Development presents to the Board a business case that distills trends into top-line growth opportunities, thereby quantifying the significanceofMegaTrendsto the business.

ActionThe VP, Corporate Development leads the multidivisional Mega Trends team through a series of strategy planning workshops.

ActionThe Mega Trends team members individually and collectively identify, cluster, and prioritize trends with the greatest growth opportunities.

ActionThe Board, VP, Corporate Development, and divisional leadership integrate Mega Trends into critical stages of the planning process to ensure trends inform all strategic planning decisions.

Objective Establish a companywide definitionforMegaTrends.

Objective Secure the Board’s commitment to Mega Trends.

Objective Create a dedicated Mega Trends team to carry out workshops that analyze Mega Trends.

Objective Identify the most meaningful Mega Trends and focus on those with the greatest potential impact on growth.

Objective Integrate Mega Trends with the strategic planning process.

Integrate with Strategic Planning Process

Prioritize Mega Trends

Establish Mega Trends TeamSecure Buy-in from BoardSet Mega Trends Criteria

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growth team m e m b e r s h i p™ 3key takeaway: Establish criteria for identifying Mega Trends and then develop Mega Trend clusters

VP, Corporate Development selects criteria for identifying major global trends…

Setting Mega Trends Criteria

…and conducts research to compile a list of trends and sort them into clusters

Creating Mega Trends Clusters

Is it a Mega

Trend?

Consultant Workshops

VP, Corporate Development participates in workshops with external consultants to generate a list of relevant Mega Trends.

External Research

Corporate Development leverages syndicated research to analyze and cross-referencespecificMegaTrends.

ResearchfindingsallowCorporate Development to organize Mega Trends into four clusters. This structure helps keep the trends to a manageable number and to explore correlations between them.

The data-gathering exercise took 6–7 weeks.

Corporate Development Team

Macroeconomics & Environment Market Dynamics

•Global population growth• Increasing urbanization

•Globalization: BRIC and the Next 11• Volatility and pace

Politics & Regulation Technology

Increasing government regulation around:• Emission standards•Health and safety

•Disruptive technologies • Improving technology standards

Disruptive

Mega Trends must demonstrateasignificantglobal impact with the potential to transform, destroy, or create new markets.

Interdependent

Mega Trends should share cause-and-effect relationships that enable companies to capitalize on multiple opportunities arising from a single trend.

Relevant

Mega Trends must have a direct impact on Knorr-Bremse’s business model, markets, and innovation decisions.

Profitable

Mega Trends must highlight specificopportunitiestoincrease revenue in high-growth markets.

Long-Term

Mega Trends must have a long shelf life (5+ years) to expand the time horizons used forstrategicplanningandtoreflectthelonglife cycles of Knorr-Bremse’s products.

For example, population growth will drive greater urbanization, which in turn will spur investment in infrastructure. This will then drive spending on light rail systems and high-speed trains, which are key markets for Knorr-Bremse.

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Access the on-demand webinar

From Macro to Micro: Translating Mega Trends into Strategy

GTM and Dr. Thorsten Feix, SVP of Corporate Development at Knorr-Bremse AG, presented this best practice where Dr. Feix shared his key lessons learned and participated in Q&A.

View GTM’s webinar with Dr. Thorsten Feix (Knorr-Bremse AG)

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